I spent six months this year on the management team of a tech finance startup. In that time, I heard local entrepreneurs ask for plenty of things from government ministers: a relaxation of our arcane visa rules (to enable them to employ talented developers from overseas) and a cut in National Insurance contributions (the biggest cost on small, growing businesses is the wage bill) were by far the most common.

What I never heard was anyone – even the most counterintuitive skin-tight jeans-wearing hipster – begging for £50 million to be handed to local incompetent quango "Tech City", for the purpose of "peninsularising" the local roundabout. But that is what David Cameron has just announced. I have no idea what "peninsularisation" is. Part of me hopes it means each day the Peninsular war would be refought by actors. At least that would be a folly worth watching.

Sadly, the plans seem to include building some kind of co-working "arts space" in the middle of the local roundabout. I'm sure there are plenty of bitter laughs over craft beers and organic orange juice at Shoreditch Grind this evening. The iconic Shoreditch Café is a regular haunt of the local startup community. The view – over the ugly, busy roundabout – isn't much, but no one in the community expects it to be.

People who work in Shoreditch see it as an industrial area; they go there to make money. There's a thriving nightlife, bars, restaurants. Entrepreneurs worry about that, though. When tech businesses first started in East London, they were attracted by how low the rent was in dusty, cavernous, charmless office blocks there.

If you talk to any business in the area, they'll all share a story of landlords ramping up the rent. When you ask the landlords how they're justifying raising the rent on the building, they shrug and say "This is Tech City, mate – prime real estate now".

"Tech City" – normally said with a wry smile by the local community – is the investment authority which is supposed to help local startups thrive. It's very good at producing PowerPoint presentations showing how well it's doing, but even a swift interrogation of the figures raises questions. They have a reputation for claiming every success from Shoreditch as theirs, and also for claiming any business where one employee has an iPhone as a" tech business" – for example, they say the nightclub Fabric fits the bill. Impressive as the vibrating dance floor is, I'd politely argue that's stretching the definition somewhat.

Other tech clusters – Cambridge, Guildford, Dundee – seem to manage perfectly well without a building full of well-meaning, taxpayer-funded evangelists. Indeed, the tub-thumping self-promotion of Tech City often puts up the backs of entrepreneurs outside of London, who often characterise the roundabout as nothing but a bunch of dreamers sipping lattes and wishing they were in The Social Network.

The truth is, the cluster is full of hard working people, and brilliant businesses – especially in unsexy but important worlds of online finance and software as a service. The Shoreditch tech cluster has thrived in spite of, not because of, the meddling from the quangocrats at Tech City; the Tory-led government should be listening to the local successful entrepreneurs, not throwing money at art projects designed by parasites.